WASHINGTON -- Enron Corp.'s collapse was just the latest in a series of horrific accounting failures at big companies, the chairman of the Securities and Exchange Commission said while calling for a new private-sector agency to regulate the accounting profession.
SEC Chairman Harvey Pitt, making a rare appearance before reporters Thursday, also promised that if anyone at any company or auditing firm is found to have lied or destroyed documents, "then we turn the full wrath of the (SEC's) enforcement powers against those individuals."
At a news conference, Pitt -- who once represented Enron's auditor, Arthur Andersen LLP -- also said he has had no involvement in the watchdog agency's investigation of Enron and Andersen beyond voting to authorize it.
Pitt, a prominent securities lawyer before President Bush chose him last spring to head the market watchdog agency, had Andersen and the other Big Five accounting firms among his clients. As SEC chairman, he normally would receive updates from agency attorneys on the course of the investigation and would vote along with fellow commissioners on any enforcement action to be taken.
Several Democrats in Congress and the private group Common Cause have called on Pitt to remove himself from the inquiry. The SEC is investigating Andersen's role in Enron's complex accounting, including questionable partnerships that kept about $500 million in debt off the energy company's books and allowed Enron executives to profit from the arrangements.
Attorney General John Ashcroft already has disqualified himself from the Justice Department's criminal investigation of Enron because he received campaign donations for his failed 2000 Senate re-election bid from Enron.
"There is no way that I would ever do anything to compromise the integrity of this agency's actions," Pitt said. Other than having voted with fellow commissioners to authorize the SEC inquiry, Pitt said, "I am not participating in the Enron investigation."
Pitt proposed a new private-sector body to regulate the accounting profession, saying the "tragic" collapse of Enron was the latest in a series of horrific accounting failures at big companies that burned investors and eroded their confidence in the integrity of financial reports. The new body would be dominated by executives and experts from outside the accounting industry.
"The need for change cannot be ignored any longer," he said. "Restoring the public's confidence in the accounting profession" is the primary goal.
Significant accounting problems have occurred in recent years at major companies including America Online Inc., Cendant Corp., MicroStrategy Inc., Rite Aid Corp., Sunbeam Corp., Waste Management Inc. and Xerox Corp.
The SEC has pursued several cases. Last June, for example, Andersen agreed to pay a $7 million fine to settle the SEC's allegations it issued false and misleading audit reports that inflated Waste Management's earnings by more than $1 billion.
Pitt declined any comment on the SEC's investigation of Enron and Andersen.
He did say that in general, the SEC will reserve its harshest punishment "for anyone who lies or obstructs (an SEC) inquiry."
Sanctions normally would include civil fines and other actions. Unlike the Justice Department, the SEC does not have the power to put wrongdoers in jail.
Senior managers at Andersen raised concerns about Enron's accounting practices in February and considered dropping the energy company as a client, according to an accounting firm memo uncovered by congressional investigators.
Enron fired Andersen as its auditor Thursday.
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